Gary Humphries (ACT, Liberal Party, Shadow Parliamentary Secretary for Defence Materiel) Share this | Link to this | Hansard source

asked the Minister for Finance and Deregulation, upon notice, on 16 November 2010:

Given the advice provided by the department's 'Red Book' to the Minister that the 'current unfunded liability' for Commonwealth and military superannuation is $127 billion:

(1) Can an explanation be provided and substantiated as to how this figure was derived when the Future Fund Actuary estimated the liability to be $96.3 billion for the 2009-10 financial year, and the department itself was quoted on page 34 of the Matthews Review report (Review of pension indexation arrangements in Australian Government civilian and military superannuation schemes, by Mr Trevor Matthews, dated December 2008) to have estimated the figure to be $100.3 billion as of 30 June 2008.

(2) Is it not standard practice to quote unfunded liability figures as a discount value in the current year and not in nominal terms unless otherwise specified.

(3) In the department's submission to the Matthews Review, the department estimated the unfunded liability (in nominal terms) would be $147 billion by 2020 (page 19), but the latest 'Red Book' suggested that the figure is $168 billion; what has significantly changed that would account for a $21 billion increase.

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

The answer to the honourable senator's question is as follows:

(1) The estimated unfunded superannuation liability as at 30 June 2011, as reported in the 2010-11 Budget Papers was $127.1 billion for the Commonwealth defined benefit superannuation schemes.

The figure of $96.3 billion is not an estimate of the unfunded superannuation liability. It is the Target Asset Level (TAL) for the Future Fund for 2009-10, representing the target assets of the Future Fund that would be required to offset the superannuation liability at that point in time.

The figure of $100.3 billion was the estimated unfunded superannuation liability as at 30 June 2008, as reported in the 2007-08 Final Budget Outcome. Budget Paper No 1of 2009-10, page 9-14, explains that Australian Accounting Standards require the final Budget Outcome valuation to be determined by reference to a discount rate based upon the market "spot value" at the reporting date. This generally differs from the rate used for Budget reporting purposes.

(2) The estimated unfunded superannuation liability at a particular date represents the present value of expected benefit payments from Consolidated Revenue in respect of superannuation entitlements accrued to that time.

(3) The estimate of the unfunded superannuation liability at 2020 of $147 billion that was provided by the Department of Finance and Deregulation to the Matthews Review reflected the number that was presented in the 2008-09 Budget Paper No. 1 at pages 7-8. This was based on assumptions from the actuaries' 2005 Long Term Cost Reports for the relevant superannuation schemes.

The $165 billion reported in the Department's Red Book is based on revised assumptions from the actuaries' 2008 Long Term Cost Reports for the relevant superannuation schemes which takes into account the actual experience of the schemes since 2005.